Kroes renews calls to split up energy firms

The EU’s anti-trust chief has reiterated her plea for ‘ownership unbundling’, defying the French and other critics who claim that liberalisation is increasing the EU’s vulnerability to suppliers that are willing to use oil or gas as a political tool.

There is “a fundamental problem” with large energy companies such as Germany’s E.ON and France’s EDF controlling energy networks as well as production and sales, Competition Commissioner Neelie Kroes told a conference in Essen, Germany.

Speaking on 5 February, the EU anti-trust chief said that full “ownership unbundling” would solve the “inherent conflict of interest” when incumbents impede access to the network by new competitors in order to protect their own market share, and hesitate to invest in cross-border transmission capacity.

The situation, she said, is holding back investments in renewable energies that “Europe so badly needs for security of supply”. Kroes is supported in this view by environmental group Greenpeace, which backs full ownership unbundling to allow investments in new, cleaner-energy technologies.

But the liberalisation of energy markets driven by the Commission over the past ten years is facing a growing body of critics, who claim that it has increased the EU’s dependence on imported gas from Russia.

Gas-fired power plants (due to their flexibility), relatively lower initial-investment costs and pollution levels were favoured in the 1990s to help the EU’s environmental and security of supply objectives, said Jerôme Guillet, an investment banker for the energy sector in a recent FT article.

But the liberalisation process has only exacerbated Europe’s demand for gas at a time when prices are rising, effectively increasing Europe’s dependence on Russia, Guillet added.

“Worrying about Russia controlling our supplies while de facto encouraging investment in gas-fired power plants appears silly,” Guillet wrote. “Energy market deregulation,” he added, “is incompatible with the fight against global warming…and with security of supply when exporters will not play by our rules.”

In a letter to the Commission on 10 January, France’s Industry Minister François Loos argued that large European energy groups were “a guarantee to security of supply”, saying that they are in a stronger position to negotiate prices with major supply countries such as Russia.

EU member states will decide whether they agree to full ownership unbundling in time for a summit on 8-9 March.

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